Nigeria’s Money Supply Hits N119.52 Trillion as Government Borrowing Falls 25.7% in August 2025
Nigeria’s financial landscape shifted notably in August 2025 as the country’s broad money supply (M3) rose to N119.52 trillion, even as government borrowing fell sharply by 25.74% year-on-year, according to fresh data from the Central Bank of Nigeria (CBN). The increase in liquidity was fueled mainly by quasi-money balances, which climbed to N80.21 trillion, showing that households and firms are increasingly keeping funds in interest-bearing deposits to shield themselves from persistent inflation.
Despite this growth in liquidity, the composition of Nigeria’s money supply tells a more cautious story. Narrow money (M1), which includes cash in circulation and demand deposits, stood at N39.30 trillion, reflecting a preference for safer, bank-held deposits over physical cash. Demand deposits slipped by 1.63% to N34.85 trillion, while currency outside banks also declined marginally. Analysts say this trend underscores the growing adoption of the CBN’s cash-lite policies and reduced reliance on cash transactions.
On the credit side, the CBN’s report showed that government borrowing contracted to N23.13 trillion, a steep decline compared to last year. This suggests reduced dependence on deficit financing and tighter fiscal discipline. Meanwhile, credit to the private sector remained steady at N75.83 trillion, but experts caution that banks remain hesitant to lend aggressively to businesses, despite high liquidity levels. This cautious credit environment could limit job creation and slow private investment growth.
The CBN has also been active on the monetary policy front. At its September 2025 Monetary Policy Committee meeting, it cut the Cash Reserve Ratio (CRR) for commercial banks from 50% to 45% and introduced a new 75% CRR on non-Treasury Single Account (non-TSA) public sector deposits. These moves, along with adjustments to the Monetary Policy Rate corridor, aim to better manage liquidity and encourage interbank participation. However, open market operations were scaled back, with CBN bills issuance dropping 14% in just two months, signaling a more cautious sterilization stance.
Economists warn that while Nigeria’s rising money supply points to abundant liquidity, the decline in government borrowing and banks’ lending caution mean the benefits may not reach the wider economy. With households saving more and firms holding deposits rather than spending, consumption-driven growth remains subdued. At the same time, fewer government-backed projects could reduce fiscal stimulus. As one analyst put it, “Liquidity is high on paper, but without stronger lending and investment, the impact on jobs and living standards will be limited.”
source: nairametrics